Panama Papers and the turtle syndrome
LIMITING possible damage to the reputation of Panama’s financial industry after the “Panama Papers” revelations may depend on “the nature and speed” of the government’s response, said the Fitch rating’s agency on Thursday April 14.
Although the government was aware that an explosive device was about to be tossed into the cabinet room, (and TV crews from the BBC and Aljazeera were already setting up their background shots) it didn’t start to react until the pin was actually pulled which, given its growing reputation for moving like a turtle looking for a place to lay eggs, was not a surprise to many political observers.
While other countries were raiding the local offices of the Mossack Fonseca law firm, Panama, in the center of the biggest maelstrom to hit the financial sector since the Canal was opened, appeared to be sitting on its hands, until on Monday, April 11, authorities made a token visit to the Marbella office 8 days after the “Papers” became the media lead story around the world .
That visit was allegedly to check how the company files were hacked. The next day a hastily formed organized crime unit moved in for a highly publicized 27-hour search of the company files. Given that over a month earlier the Brazilian authorities had conducted a raid on Mossack Fonseca and uncovered attempts at erasing files, the control center of over 40 offices around the world had at least 9 days to wave a wand over its 100 odd servers.
This led to the posting on social networks of a cartoon showing the company’s co-founder, Ramon Fonseca, on the phone to President Varela telling him it was now OK to pay a visit.
Fonseca had been a key advisor to Varela, and president of the ruling Panameñista Party.
So while the raid showed that the turtle had found a nesting spot we will have to wait for the eggs to hatch.
Meanwhile Fitch recognizes that Panama has other eggs to fry and says the diversified economy will continue to support the quality of sovereign risk despite the MF leaks which nonetheless has “generated a scrutiny” of the industry offshore financial services.
The agency said the implications for the financial center are uncertain, while possible damage to its reputation ate presents downside risks for growth and investment.
It affirms that progress in the adoption of standards for information exchange of the Organization for Economic Co-operation and Development (OECD) will probably be the key focus of international attention.
Locally, it will have been noted that the Financial Pacific skeleton has appeared in many of the revelations, while its former operators and others linked to its various scandals, including an investigator’s “disappearance” still walk free
To end on a positive note: Fitch affirmed the country’s investment grade last February and maintains a positive outlook for the economy and the new behind schedule and over cost Canal gates, open in June.
